Empty homes set to lose council tax discounts

Posted on 3rd November 2011

Landlords and property investors with an interest in empty property insurance and holiday home insurance will be alarmed at words emanating from Whitehall suggesting they may well incur some unforeseen extra costs within their property portfolios.

Landlords hit by two pronged attack

In a raft of what has been described as “discretionary measures”, Communities Minister Eric Pickles has proposed to give local authorities and councils the power to source their council tax collection more “creatively”. The measures have been introduced in response to the housing shortage that is evident in most areas of the UK at the moment and the two measures that will affect property investors most are the plans to scrap the council tax discount on empty homes and to put extra taxes on the owners of properties that have been vacant for over two years.

Housing shortage is the crux of the matter

With homeless charities claiming there are over half a million perfectly good homes lying empty, councils and the Government have been under pressure to ease the situation. The current plan to build hundreds of thousands of new homes in the next ten years will certainly help the problem in the long term, but won’t help the current dire situation faced by thousands of homeless families.

More stick than carrot

The Government believe scrapping council tax discounts will encourage landlords to keep their properties in use, and the rumours of a surcharge of up to 50% of council tax levies on properties that have been empty for over two years can be viewed as a threat rather than incentivisation.

Landlords worried that home improvements could fall foul of new rules

Of course no-one wants to see homes empty, but landlords who want to develop and improve their properties fear they may be penalised by the new system. It is certainly feasible that the purchase of a property and the subsequent change of use; for example from a large detached Victorian house to a purpose built set of apartments for disabled people could easily take two years. Would the owners of the property then fall foul of the new council tax measures? Certainly David Salusbury of the National Landlords Association is worried about such a scenario but Mr Pickles said councils would have the chance to judge each case on its merits. He stressed the measures would be introduced to help families find homes and to take the burden of debt off those who could least afford it.